Archive for November, 2010

I just wrote an article in Mint on changes needed in teaching economics. I could not expand but the changes apply to finance classrooms as well. So just added one line that similar changes are needed in finance curriculum as well. Having studied finance before the crisis, I was always get surprised how little weight both teachers and students put on knowing and understanding economics. So you had pure finance teachers which only focused on financial sector related issues.

In this superb speech Jean Boivin, Deputy Governor of the Bank of Canada points to the deficiencies in finance teaching before the crisis. He was an economics professor at HEC Montréal, a business school. So he links the issues really well:

He says given the eco situation, he would prefer to cut rates further. But with rates at zero bound, could there be other options? We know there are many unconventional/non traditional measures. But what about fiscal policy?

He says three changes in tax policy will help deliver a stimulus equal to 100 bps policy rate cut.

One only gets to see these things in India. Despite many criticisms against the Navi Mumbai airport site, it gets final clearance from Environment Ministry. The press release is here.

There is a nice timeline of events since 1997 when talks of second airport in Mumbai started. So it has taken us 13 years to get an airport in a city like Mumbai! And that too is going to be a puny (just 60 million passengers in full capacity). Going by India’s project delays and corruption the final costs are likely to be what it would cost to build an airport 4 times the size.

The first site for second airport was Rewas Mandwa. The press release says Navi Mumbai airport was proposed as a site in 2000. The idea was Rewas Mandwa does not have adequate infrastructure and Navi Mumbai is within Mumbai Metropolitan Region. There are so many airport sites which are unviable to begin with….It is amazing how this was taken as an argument.

The National Science Foundation sent out a Dear Colleague letter requesting white papers on grand challenges in the social and behavioral sciences. The Directorate for the Social, Behavioral, and Economic Sciences of the National Science Foundation (NSF/SBE) will use these white papers “to frame innovative research for the year 2020 and beyond that enhances fundamental knowledge and benefits society in many ways. This request is part of a process that will help NSF/SBE make plans to support future research.” The Dear Colleague letter is available here. Advance copies of some of the papers were also sent to the AEACGR and are available below.

So you have white papers from Acemoglu, Poterba, Rodrik, Duflo, Alesina, Diamond etc. The topics are also highly diverse – development economics, macroeconomics, environment economics, market design etc. You name it and you have it here.

On each, there are neat 4-5 pager papers on what to expect from econ research in their fields in future and what are the challenges?

I have started reading them…..will post on them if I find anything interesting. Superb resource.

Norway Central Bank Deputy Governor Jan F. Qvigstad gives a superb speech on the topic. The speech revolves around how central banks make decisions and what makes a decision good or bad. He also talks about what goes into trying to make better decisions. It covers following areas:

Independence provides a sound framework for interest rate decisions

We make decisions under uncertainty

Groups often make better decisions than individuals

But groups are no guarantee for good decisions

How do we arrive at a decision?

Was the decision good?

The overall speech is superb drawing insights from other subjects like history, politics, psychology, television shows etc.

Bernnake has faced severe criticism for his recent decision to go ahead with QE2. The criticisers include people from all around the world – economists like Feldstein, US politicians like Sarah Palin, German Finance Minister, Chinese policymakers etc.